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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. –Ludwig von Mises

Ship seizure in China baffles Japan April 22, 2014 3:39 am JST

TOKYO — The seizure of a Mitsui O.S.K. Lines vessel in China may have consequences for Japanese business activity there, Tokyo warned Monday as officials here pondered the true intention behind the move.

Embittered by a territorial row, Japan and China were just starting to seek a rapprochement when the Shanghai Maritime Court said Chinese authorities had impounded the Baosteel Emotion on Saturday.

The iron ore carrier appears to have become a pawn in a dispute stretching back to the 1930s. At the time, a Chinese shipowner chartered two freighters to a Japanese shipping company that later changed names and merged with Mitsui O.S.K. Lines. The vessels were commandeered by the Japanese government and subsequently sank. The owner’s relatives sued Mitsui O.S.K. Lines for damages in China and won, with a high court upholding the original verdict in 2010.

The company "was seeking the possibility of out-of-court settlement when the vessel was suddenly impounded" by authorities in Zhejiang Province, Mitsui O.S.K. Lines said in a statement Monday.

The Japanese government expressed its concerns over the incident through its embassy in Beijing.

The seizure threatens to "fundamentally undermine the spirit of the normalization of Sino-Japanese relations as laid out in a 1972 joint communique," Chief Cabinet Secretary Yoshihide Suga told reporters.

Russian banks vote for national payment system from scratch Published time: April 14, 2014 18:38 Edited time: April 15, 2014 07:00

Banks polled by the Central Bank of Russia (CBR) say they want a completely new domestic payment system created from scratch instead of using one of the three systems already in the works.

Last week the Central Bank polled a number of Russian banks on the national payment system (NPS), says the Vedomosti daily.

The result showed that most of Russian lenders voted against developing one of the already existing platforms:The PRO 100 payment system used for Universal Electronic Cards, Golden Crown and Union Card.

The regulator suggested creating a non-profit organization together with the commercial banks and the payment systems, both national and international to run it.

While the Russian authorities are trying to speed up the development of Russia’s national payment system, which would shield it from further disruptions by Visa and MasterCard, market players say most banks are now just looking to buy time.

Visa, the world’s largest card services company, says its revenue growth slowed to a four-year low, as cross-border operations with Russia were hit by the political tension over Ukraine.

"We are caught between the politics of the United States and the politics of Russia,"Reuters quotes Byron Pollitt, Visa’s Chief Financial Officer."We’re clearly seeing a drop-off in cross-border volume, and sanctions are expected to have some impact on volume."

For the first time in more than four years Visa’s quarterly revenue growth declined to single digit percentages amid a strengthening dollar. In the second quarter ended March 31 it was 7 percent, down from 11 percent in the first quarter. The company projects revenue growth to slow further this quarter.

In March Visa and another US-based payment system MasterCard suspended services to two Russian banks after President Barack Obama imposed sanctions on Russia.

President Vladimir Putin said Russia would develop its own payment system, which should start operating in about 6 months.

Ukraine’s growing gas debt may lead to the failure of the country’s transit obligations and the reduction of gas supplies to south-eastern Europe, said the Russian Energy Ministry.

Officials from Russia, including Energy Minister Alexander Novak and Gazprom CEO Alexei Miller, and officials from Bosnia-Herzegovina, Macedonia and Moldova held talks in Moscow on Saturday.

The meeting, also attended by officials from the Russian Ministry of Economic Development and the Finance Ministry, was held in the form of consultations on the security of gas transit through Ukraine.

“Currently Ukraine’s debt is US$2.238 billion, this [figure] does not include gas deliveries made in April,” Novak noted. “The debt will rise 1.3 billion for the April deliveries.”

Ukraine’s debt may lead to a situation where not enough gas will be pumped into Ukrainian underground storage facilities, which may create the risk of non-performance by Ukraine of its transit obligations and of undersupply of gas to Southeastern Europe, the ministry said.

China Takes Steps to Further Conceal Gold Holdings Posted on April 24, 2014 by The Silver Bug

It has long been public knowledge that China has been secretly adding to its gold reserves. Speculation abounds as to the quantity of gold that China holds, and even further speculation surrounds what they plan on doing with it.

Many precious metals experts believe that China is gearing up for the “end game” in which they will usher in a new global currency, a currency that will displace the US dollar and bring about a new age of prosperity for China. The truth of the matter is we don’t know.

Up until now, the only way investors could get any indication of how much gold China was accumulating was from the monthly release of export data from Hong Kong, which last year supplied $53 billion worth of gold to China last year. All that is about to change.

China has announced that it will begin allowing gold imports directly through its capital, Beijing. China would have no obligation to release or disclose its import numbers, thus making its accumulation of gold even more discreet.

The People’s Bank of China is likely to continue its trend of secrecy; they have made it well known that they intend to diversify out of US treasuries, much to the disappointment of the Federal Reserve.

Yesterday, we jokingly noted that with separatists blockading Slavyansk from a Ukraine special-forces invasion, and with the Ukraine army blockading Slavyansk from said separatists (unclear exactly why), that the east Ukraine city of Slavyansk is easily the most blocked city in the world (and in dire need of fiber). However, based on just released satellite imagery showing the build up of Ukraine forces around Slavyansk – a city which as a reminder is located in Ukraine – what is going on around Slavyansk is no laughing matter.

Russian RIA Novosti reports that it has received satellite photos, "which clearly show the accumulation of a large number of Ukrainian military equipment and weapons on the border with the Russian Federation and in the vicinity of Slavyasnk." RIA cites a source in the Russian Defense Ministry, who commented that the pictures show a military formation designed "to wipe out the city and all its inhabitants from the face of the earth."

According to source, the group has more than 15,000 troops from the Ukraine army and national guard, about 160 tanks, 230 infantry fighting vehicles and APCs, and as much as 150 mortars, howitzers and multiple launch rocket systems ("Grad" and "Smerch").

The source concludes that "This concentration of troops in one area is not compatible with the potential of self-defense forces, armed with only a small number of pistols and submachine guns."

Tougher Western sanctions against Russia would likely have dire consequences for that country’s monolithic, energy-reliant economy, but experts say the punishment also could trigger retaliation from Moscow against American and European multinationals.

"There no doubt would be Russian retaliation," said Justin Logan, director of foreign policy studies at the Cato Institute. "Companies with money tied up in Russia would have a tough time getting it back out."

The White House said Friday that President Barack Obama and the leaders of Germany, the United Kingdom, France and Italy agreed after a conference call that they’re ready to inflict targeted sanctions against Russia if Moscow escalates tensions in and around Ukraine.

And during an official visit to Japan this week, Obama warned that new sanctions against Russia have already been "teed up."

The lion’s share of foreign money in Russia is from major energy sector players like Shell, Exxon, and BP, said Fadel Gheit, senior energy analyst at Oppenheimer.

Shell is working with Gazprom on natural gas extraction in Russia; Exxon has a multibillion dollar exploration partnership with Rosneft, a major oil producer controlled by the Russian government, and BP owns nearly 20 percent of Rosneft.

If you’re paying attention to geo-political and economic affairs at the moment, then you cant’ ignore the gathering storm clouds in Europe.

No one at the White House will officially admit it, but we may well be sitting on the cusp of a widespread conflagration. To suggest otherwise is simply naive. The chess game is, without a doubt, in full swing.

After having threatened Vladimir Putin’s $40 billion personal fortune with asset forfeiture last week, the United States continues to push forward with a variety of sanctions against anyone and any nation believed to be providing material support to pro-Russian interests. This morning the S&P ratings agency, likely with the support of U.S. officials, fired a shot across the bow of the Russian economy by downgrading the country to just above “junk status,” a move likely designed to scare foreign investment interests and bank capital to flee the country.

Russia retaliated almost immediately by proposing a scorched earth policy reminiscent of their tactical withdrawal against the Germans in World War II. In essence, should the United States continue its attack on the Russian economy and individual wealth, the country will begin to divest itself completely of Western influence by withdrawing all dollar and Euro denominated assets, selling investment bonds of any country supporting the sanctions, and engaging in global trade through exchange mechanisms that do not involve the dollar.

But far more importantly, and ahead of yet another round of western sanctions which appears imminent unless Obama is to look even more powerless than he currently is (granted, a difficult achievement), Russian presidential adviser Sergei Glazyev proposed plan of 15 measures to protect country’s economy if sanctions applied, Vedomosti newspaper reports, citing Glazyev’s letter to Finance Ministry.

SAN JOSE, Costa Rica (AP) — The Costa Rican government says it’s waiting for the Obama administration to explain why it improperly devised a secret "Cuban Twitter" network from inside the Central American nation’s borders despite warnings in 2009 that the plan could jeopardize the two countries’ diplomatic relations.

Costa Rican Foreign Minister Enrique Castillo said it was "inappropriate" to use his country for developing the primitive social media network, known as ZunZuneo, which aimed to stir political unrest in Cuba. The network was created under the U.S. Agency for International Development, but its users were unaware it was backed by the U.S. government.

"I think it’s inappropriate to use an embassy in Costa Rica for this type of operation that harms a third country," Castillo said in an interview with The Associated Press. "We’re not filing a complaint. The point is that embassies accredited in Costa Rica don’t have to submit their plans or programs for the Costa Rican government’s approval."

State Department spokeswoman Jen Psaki acknowledged Wednesday that the U.S. Embassy in San Jose received a diplomatic note from Costa Rica requesting an explanation after the AP first reported on the program in early April. "In the following days, embassy staffers have reached out to their MFA (Ministry of Foreign Affairs) counterparts on multiple occasions about the issue and those conversations have been ongoing," she said.

When asked about the issue on Thursday, Costa Rican Communications Minister Carlos Roverssi said: "Look, when we found out through AP, which is the agency that made the information public, we officially asked the government of the United States to clarify the facts exactly as they have been denounced.

‘Mutual distrust’: Ecuador ejects US military group Published time: April 25, 2014 13:11

Ecuador has given a group of 20 US Defense Department employees until the end of the month to quit the country. President Rafael Correa had previously said the presence of the US military in Ecuador was “scandalous” and they had “infiltrated all sectors.”

Ecuador has officially requested that all 20 Defense Department employees in the US Embassy in Quito cease their activities and leave the country by the end of the month, embassy spokesman Jeffrey Weinshenker confirmed to AP. He said the embassy had received a formal letter dated April 7, alerting them to the imminent expulsion of the group.

Previously, Correa attacked the US’s military presence in the Latin American country, claiming there were even more operatives.

“There are about 50 of them. Who can justify this? We are now taking action accordingly,” he said in January, pledging to have them removed from the country. He added that these operatives had infiltrated all sectors of the Ecuadorian political sphere, referring to their presence as “scandalous.”

Correa said that such activities have led to a climate of “tensions and mutual distrust” between the two countries.

When Ukrainians took to the streets to protest their government in late November, they hoped to launch a revolution. What they didn’t realize when they toppled President Viktor Yanukovich in February is that a larger revolution would be in Vladimir Putin’s head.

While the president of Ukraine has been replaced, most of the people running the country are part of the permanent political class. The chances of a major break with the past are small. In Moscow, in contrast, the ideological, geopolitical and economic rule book is being rewritten.

Former Kremlin operatives, serving officials, diplomats and dissidents that I recently spoke to in Moscow all agreed that Putin, who is a pragmatic leader, has been reborn as a true revolutionary who will challenge the West in the following ways.

1) Putin confronts Western utilitarianism with a newfound ideological fervour. In the 24 hours before Yanukovich’s fall, Putin was contemplating two options, according to a political operative. One was setting the Ukrainian president up as a “legitimate government in exile” in the eastern town of Kharkiv. The other was annexing Crimea.

Putin was drawn to the potential of ethnic nationalism in Crimea. He knew its power and he feared that if he did not tap into it, someone else would. Once Crimea had been reclaimed, Putin became a prisoner of that nationalist fervour as much as he benefitted from it. He now needs to meet the expectations he has set in motion. What may have started as a tactic to ensure his political survival has transformed into a mission that will secure his place in Russian history.